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Energy Exploration Should Be a Centerpiece of Obama's Jobs Agenda
Posted By:  - 09/08/11

The President is gearing up for yet another jobs speech, the latest attempt to show that this iteration of the mythical “jobs pivot” is for real. Sadly, if we had a job every time Obama gave a jobs speech, why, we’d be pretty close to full employment by now.

Rather than continue talk Americans to death, NTU has been advocating a number of actions Obama could take to breathe some life into our stagnant economy. One of the most important things is to allow companies to responsibly search for and develop domestic energy sources.

For years, the federal government has kept vast amounts of energy under the lock and key of an exploration moratorium, or its more modern, but no less nefarious cousin, the “permitorium” whereby development is ground to a halt through bureaucratic pigheadedness rather than statutory barriers.

Already this year the House of Representatives has passed several pieces of legislation aimed at putting an end to the governmental obstructionism that is forcing rigs to leave our waters, energy exploration to slow, and investment to flow to other countries. Sadly, each of these bills has languished in the Democrat-held Senate where most of them have not even been brought to a vote.

Tonight’s jobs speech presents yet another chance for President Obama to wake up to the fact that improving the efficiency and rate of permitting activity could rev our idle jobs engine. In anticipation of Obama’s supposed plan, a group of 18 organizations have put together a coalition letter urging him to consider the positive economic impacts of safe and reliable domestic energy.

Here’s an excerpt and the full letter can be found at the link below,

“According to a recent study from some of the leading energy economists in the world - IHS Global Insight and IHS CERA - increased exploration and production activities in the Gulf would create 230,000 jobs, increase US gross domestic product by more than $44 billion, and contribute some 400,000 barrels per day of oil production towards US energy independence

. . . Therefore, we urge you to make responsible and effective exploration and development of energy resources in the Gulf of Mexico and elsewhere a centerpiece of your jobs agenda.”

http://www.gulfeconomicsurvival.org/phx-content/assets/files/Obama_Letter_on_Exploration_and_Jobs.pdf

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Global Warming: Public Choice Problems and Perverse Incentives
Posted By:  - 08/04/11

A guest post by Zebulen Riley:

Recent high temperatures have global warming activists confusing weather and climate. Americans must keep their cool during this heat wave, rather than melt down in the face of pressure from advocates for sweeping climate change policies.  These self-styled defenders of the ecosystem demand heavy government intervention in the economy to mitigate rising global temperatures and sea levels, and, of course, to save the polar bears.  However, simple economic analysis reveals that it is unreasonable to believe government capable of solving any kind of climate crisis.  

Public choice theory shows that regardless of whether the activists are right or wrong about the science of climate change, they’re dangerously wrong about how to approach it. Public choice economics extends the behavioral assumptions of economics to government.  That is, just as economists assume that people engage in rational, self-interested behavior in daily market transactions, public choice theory assumes politicians and bureaucrats engage in rational, self-interested behavior in political decision-making.  To assume that people become entirely selfless promoters of the public good upon entering politics is fitting for a 7th grade civics textbook, but not for real life.  Of course, the goal of serving the people can motivate some to become involved in government, but politicians who advocate heavy regulation to combat global warming act in self-interested ways, just like everyone else.

When citizens feel guilty about their environmental footprint and buys carbon offsets to ease their conscience, a former vice president cashes in at the bank. When a wind farm was built off the coast of beautiful Nantucket Sound, destroying the view from his living room, a late Massachusetts Senator cried foul.  And when scrubbers were mandated for companies burning “dirty coal,” a late Senator from the state that produced the supposedly offensive dirty coal required scrubbers be used in states that burned cleaner coal in the first place.  Self-interested behavior in Washington perfectly illustrates the attitude toward combating climate change: It’s great as long as I’m reaping the benefits and avoiding the costs.  Because legislators have an incentive to shift the cost of fighting global warming to citizens outside their constituency, environmental regulations are imposed where they are most politically effective, not environmentally effective.  With thousands of legislators and bureaucrats, each trying to cost-shift onto the other, there is little reason to believe government action will be efficient in reducing the United States’ environmental footprint (whatever size it may be).

Cost-shifting occurs internationally as well.  Just like hypocritical senators love wind farms in someone else’s backyard, nations that would suffer serious financial cost to combat global warming prefer that other countries wreck their own economies instead.  Just as it is in an individual’s self-interest to shift the cost of environmental regulation onto others, it is in a nation’s self-interest to free ride on the costly efforts of other nations.  When the United States reduces its pollution, the rest of the world benefits at U.S. expense.  Thus, there is an incentive for the rest of the world to do nothing and “free ride” off the U.S.  Without legally enforceable anti-pollution contracts between every country (a dubious proposition), a free rider problem will always exist when trying to mitigate global climate change.

If average temperatures are indeed on the rise, a single country taking unilateral action will be insufficient to bring an end to global warming.  Because environmental regulations are most politically supported when the beneficiaries of those regulations don’t bear the costs, politicians and voters will always try to shift the regulatory costs to others.  Regulations, thus, are designed to be politically effective, not environmentally effective.  And without legally enforceable contracts between every country, too few nations would contemplate the radical environmental and energy policies to reduce global temperatures, and trillions of dollars worth of economic resources will be wasted for naught.

No serious climate scientist argues that unless urgent action is taken Earth will spontaneously combust from rising temperatures.  Most peer reviewed studies project mild warming over the next century.  Rather than losing our cool and spending trillions of dollars on the cause of “fighting global warming,” Americans would do better to acknowledge government’s inability to meaningfully affect world temperatures and recognize the perverse international incentives that make the dream of reversing global warming a near-impossible feat.

 

Zebulen Riley is an associate policy analyst with the National Taxpayers Union Foundation.

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More “Toxic” Research at EPA?
Posted By: Pete Sepp - 07/08/11

As these pages have long depicted, excessive government paperwork and overbearing regulations can cost taxpayers and consumers dearly, sometimes doing as much damage as high taxes, pork-barrel spending, or reckless borrowing.

A report from NTU last month focused on the significant economic costs that the Environmental Protection Agency’s regulations, including a revised ozone standard, would impose on the American economy. The author of our assessment, Dr. David Montgomery, called out EPA officials for statements implying that the Clean Air Act alone will deliver $2 trillion of benefits in the year 2020 – when Gross Domestic Product is expected to reach $20 trillion (!).

So it was with little surprise (but lots of concern) that we learned of a new controversy surrounding EPA’s research. Last week Senators David Vitter (R-LA) and James Inhofe (R-OK) sent an exhaustive 11-page letter to the EPA’s Lisa Jackson questioning scientific methods used by her agency in issuing risk assessments, following deficiencies identified by the National Academy of Science (NAS) in their review of EPA’s draft risk assessment for formaldehyde. 

The Senators raise the valid point that the fundamental problems raised by NAS warrant reconsideration of all EPA risk assessments that use the same methods, including the agency’s ongoing revision to its National Ambient Air Quality Standards (NAAQs) for ozone, which is due to be released later this month. 

Here is an excerpt from that letter (HT: Sens. Vitter and Inhofe for sharing):

Dear Administrator Jackson:

On June 15, 2011, you testified before the Senate Environment and Public Works Committee. At that hearing, we emphasized the serious nature of the scientific concerns raised by the National Academy of Sciences (NAS) in its recent critique of EPA’s draft risk assessment for formaldehyde, Review of the Environmental Protection Agency’s Draft IRIS Assessment of Formaldehyde (“NAS Formaldehyde Report”). The NAS report highlights that for over a decade EPA has continued to err in its risk assessments from issues such as a lack of information regarding study selection criteria, inconsistent methods for evaluating the strengths and weaknesses of studies, and the lack of a clear framework for evaluating the weight of evidence for establishing what causes adverse health effects. These problems have persisted despite numerous attempts by the NAS, National Research Council (NRC), and members of Congress to compel change. [Click HERE to read the rest of the letter]

Back in 2008, when a different (but likewise draconian) expansion of NAAQS was under deliberation, NTU warned in an official comment filing that that “not all of government’s burdens come from taxes, fees, expenditures, and debts. Regulatory mandates … can be every bit as destructive as more overt fiscal policies.” Apparently toxic history can repeat itself.

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Ethanol Less Popular Than on Tuesday
Posted By:  - 06/16/11

On Tuesday, the Senate voted against considering an amendment by Oklahoma Senator Tom Coburn that would have eliminated the 45-cent-a-gallon blender tax credit.  That was then, this is now.  Today, the Senate has approved an amendment sponsored by California Senator Diane Feinstein that would end the tax credit and lift the tariff that limits the importation of foreign ethanol, according to The Hill.  Ethanol is an artificial industry that has lasted for decades thanks to its supporters inside the Beltway.  For today, at least, the opponents of King Corn have won.  Tomorrow, as they say, is another day.

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Ethanol Still Popular on Capitol Hill
Posted By:  - 06/14/11

An editorial in today's Wall Street Journal highlights a report from the UN that expresses concerns about foodstocks being converted to ethanol and Senator Tom Coburn's efforts to end ethanol subsidies.  According to CNN, that effort failed this afternoon.  So, despite opposition at the UN, ethanol remains popular inside the Beltway.

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Lamborn Shines Light of Free Markets into Washington's Cloudy Energy Policy
Posted By:  - 06/13/11

Like a solar cell, on a perpetually gloomy day, so-called “alternative technologies” have consistently failed to deliver on their energy promise. What nobody seems to realize is that it is the cloud of the federal government that has been blocking out the sun.

Federal support for alternative energy technologies is not new. Beginning with President Ford’s 1975 energy act, Washington has pushed for energy independence through innovations in new technologies. The implication behind Washington’s interventionist motives was that there was some market failure preventing the search and commercialization of novel energy technologies. So the federal government donned its cape, put on its tights, and ran to the rescue.

Sadly, our government has no real superpowers, so it did what it always does – throws vast amounts of taxpayer money at the problem. Time and again, Washington engaged in highly publicized, heavily funded, and extremely dubious forays into the development of some technology. And time and again they failed.

Take the story of ethanol, one of the government’s biggest crusades, and also one of its biggest flops. Currently the federal government mandates the use of nearly 14 billion gallons of renewable fuels, imposes a stiff tariff on the importation of foreign ethanol to protect against competition, and then provides billion in subsidies to boot! So the government has not only artificially created a market, but does its best to make it “profitable,” and still subsidizes it with refundable tax credits. All the while, taxpayers are forced to pay the bill in higher taxes and fuel costs.

Fortunately, some members of Congress are doing their best to end the taxpayer-funded lifelines to bad alternative energy investments. Representative Doug Lamborn (D-CO), who has won NTU’s Taxpayers Friend Award for four straight years, is leading the charge. Recently, Rep. Lamborn sent a letter to the Subcommittee on Energy and Water Development, urging them to cut spending on the Department of Energy’s “Energy Efficiency and Renewable Energy” programs.

“If it is truly the case that this research is revolutionary investors should be eager to invest in this technology; if it is so promising, there should be no end of private capital competing to enlist researchers and secure a piece of this new energy cornucopia.”

Rep. Lamborn should be praised, not only for his staunch defense of taxpayers’ wallets, but for his brave refusal to bend to special interests. Despite pushback from his own district, Rep. Lamborn realizes the risk that all taxpayers will face if our deficit continues to spiral out of control. “In these tight budgetary times,” says Lamborn, “taxpayers should not be subsidizing work that should be done with private investment dollars. I believe the free markets are better suited to make business decisions than the federal government.”

By picking winners and losers in the energy marketplace, often well before they have been technologically or economically proven, Washington is doing renewable technologies (not to mention taxpayers) an enormous disservice. To achieve the biggest gains, free markets must be allowed to channel resources toward technologies based on their promise of cleaner, cheaper fuels, not on political pressure. Not only will this spur the innovations we’ve long been searching for, but it will ensure that taxpayers are able to reap the rewards,  without bearing the cost of questionable investment.

NTU thanks Representative Lamborn and the other House members who continue to stick up for the American taxpayer. They’re consistent defense of free market solutions provides hope that the dark cloud of government will eventually give way to the sunlight of innovation.

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McConnell Keeps Heat on EPA Over Regulatory Abuses
Posted By:  - 06/03/11

Fixing our unsustainable spending trajectory is priority one, two, and three for conservatives in Congress. And for good reason. Like the tornadoes that have plagued much of the Great Plains recently, a debt crisis threatens to hit hard and fast; but has at least granted us enough forewarning to seek shelter.

But while the debt winds continue to whip into a frenzy, we can’t ignore another potential economic disaster – the Environmental Protection Agency’s (EPA’s) regulatory overreach. It may lack the rhetorical punch of the debt limit debate, but Senate Minority Leader Mitch McConnell (R-KY) is working hard to ensure that the EPA’s backdoor energy tax and costly green energy agenda doesn’t fall out of the spotlight.

Last summer, Senate Democrats attempted to pass a massive new energy tax under the guise of a “market-based” method of curbing greenhouse gas emission. Fortunately, legislators saw the so-called "cap-and-trade" scheme for what it was - a massive tax hike - and the bill died in the Senate.

Despite the bill’s failure, President Obama warned, “Cap-and-trade was just one way of skinning the cat; it was not the only way.” His ominous foreshadowing has proved to be true. The EPA has taken up where Senate Democrats left off, substituting their self-proclaimed prerogative to regulate greenhouse gases for the will of Congress, and the citizens who elected them.

In his speech on Wednesday to the Kentucky Coal Association, Leader McConnell described the impact the EPA’s plan would have,

“Their national energy tax would hit you every time you start your car or turn on the light bulb. It would endanger millions of jobs across the country and hurt an already fragile economy. And it directly targets Kentucky’s coal industry, by making coal-fired power more expensive.”

McConnell and others have attempted to pass legislation that would prevent the EPA from going around the legislative process. Many Democrats have also realized that Congress, not administrative bodies should be the ones taking action. In voting for a bill to temporarily block the EPA from regulating greenhouse gases, Jim Webb (D-VA) has said, “I do not believe that Congress should cede its authority over an issue as important as climate change to unelected officials of the Executive Branch.”

The rebuke hasn’t stopped the EPA from overstepping its bounds. In his speech, McConnell described a similar situation happening with coal,

“The EPA retroactively “reinterpreted” its regulations and withdrew a Section 404 permit previously issued by the Army Corps of Engineers to a mine in southern West Virginia, shutting it down and throwing 90 miners out of work. Every mine in Kentucky is similarly threatened.

“The EPA declared even more permit applications to be under enhanced review, in effect playing a “run out the clock” game and putting many Kentucky mining operations in limbo, along with the economic activity mining could create.

By changing the rules in the middle of the game, any sense of regulatory certainty has been thrown out the window, and all without a single vote or hearing in Congress. In response, McConnell has proposed legislation that would set a 30 day timeline for the EPA to rule on a permit received from a mine. The EPA’s authority to reject the permit based on health and environmental concerns would be left intact, but the veil of regulatory uncertainty would finally be lifted.

Time and again, job creators and business owners have been begging Washington to remove the uncertainty that is preventing them from investing and hiring. While the debt limit negotiations are hogging the spotlight, it is good to see a high profile Senator like Mitch McConnell making sure that no stone is left unturned in the search for ways to boost job growth. And one of those ways is reigning in an out of control EPA.

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Taxpayers Defeat Obama Energy Industry Tax Hike!
Posted By: Douglas Kellogg - 05/18/11

Victory! Late last night the Senate held a vote on legislation that would have implemented President Obama’s desired tax increase on America’s energy companies. Thanks to the efforts of many, including concerned taxpayers and NTU members, the vote did not succeed - by a margin of 52-48 the U.S. Senate put an end to the proposed tax hikes.

 

The National Taxpayers Union led the charge against the vindictive tax proposal with a million-dollar advertising campaign and media blitz.

 

NTU Executive Vice President Pete Sepp, and Vice President of Government Affairs Andrew Moylan, took to the media to counter pro-tax misinformation that claimed the debate was about ‘oil subsidies’. Even Media Matters came to the aid of the President, attacking NTU’s efforts, but were swiftly countered.

 

An apparent response to rapidly rising gas prices, the tax package would clearly have done nothing to alleviate that situation, likely making things worse.

 

The only real solution to the issue of rising gas prices, increased supply, suffered a setback as well. A Republican plan to reduce bureaucratic hurdles for new drilling permits was defeated in the Senate.

 

While economically damaging tax hikes were avoided, an all-of-the-above energy policy, and corporate tax reform, that would truly solve America’s government imposed energy crisis are a ways from reality.

 

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Experts Agree: Politically Convenient Energy Taxes Won’t Help Economy or Energy Security
Posted By: Douglas Kellogg - 05/12/11

With gas prices officially besting $4 per gallon this week, partisan politics are reaching a feverish pitch in Washington DC. Posturing and finger pointing amongst politicians bent on pursuing any measure that might divert the wrath of angry constituents has led to legislation which would eliminate so-called “subsidies” for “Big Oil.” Far from the answer to higher pump prices, these damaging tax increases will ultimately hurt energy consumers and could threaten the national economy and energy security.

What would be the effect of politically driven new energy taxes? Just look at what the experts are saying:

“[One of President Obama’s targets] is the foreign tax credit, available not just to manufacturers, but to every American company doing business overseas. The government gives a credit for taxes paid to foreign governments. Some politicians think we should take this away from energy companies, raising $800 million in taxes; some think we should take it away from every company — effectively taxing them twice. But it strains credibility to call it a ‘special’ break for oil companies.”

(Former U.S. Senator John E. Sununu, The Boston Globe, 5/09/2011)

“The U.S. is the only country that taxes foreign revenues in the first place, so the dual capacity credit allows U.S. companies to compete fairly against foreign competitors. Doing away with it would dramatically disadvantage American firms relative to their foreign rivals.”

(LSU Endowed Chair of Banking Joseph Mason, The Wall Street Journal, 7/30/2010)

“Taxation systems don’t exist in a vacuum in an increasingly-competitive world. The unintended consequences of proposed changes would likely accelerate the shrinking position of U.S. companies internationally, which would be bad both for the U.S. economy and for energy security.”

(IHS CERA Chairman Daniel Yergin, CERA’s “Fiscal Fitness: How Taxes At Home Help Determine Competitiveness Abroad” Report, 9/2010)

“My estimates suggest that repealing both Section 199 and dual capacity credit would produce extensive economic losses to the U.S. economy for the next decade, including $341 billion in decreased economic output, almost $68 billion in wage cuts, and initial losses of over 154,000 jobs in 2011.”

(LSU Endowed Chair of Banking Joseph Mason, “Regional and National Economic Impact of Repealing the Section 199 Tax Deduction and Dual-capacity Tax Credit for Oil and Gas Producers,” 9/13/2010)

“In addition when we move to the safe harbor definition, on both rate of return and on the value that a company can bid, the United States finds itself at the bottom of the competitive pile … If you reduce the activities of U.S. companies internationally, then there must be long term reduction in the income that can be repatriated. Interestingly, when we think in terms of political support, it is often the oil and gas industry or the resources industry generally that is a leader in terms of entry into new countries and in terms of reestablishing diplomatic ties. The resources industry tends to be in the vanguard.”

(IHS CERA Chief Energy Strategist David Hobbs, Brookings Event, 9/27/2010)

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Media Matters Misses Mark in Criticizing NTU Anti-Energy Tax Campaign
Posted By: Douglas Kellogg - 05/11/11

Media Matters recently examined the National Taxpayers Union’s (NTU’s) efforts to oppose tax increases on energy companies (and by extension consumers), contending that “oil subsidies” could be ended so that more money can be spent on alternative energy sources.

The various points Media Matters conglomerates do not paint a clear picture of the tax situation America’s energy companies face. Instead Media Matters focuses on attacking profits, repeating analyses of oil production based on short periods of time, and mischaracterizing the nature tax deductions, all while ignoring the myriad implications of such an unabashed tax assault on a particular sector of the economy.

Right off the bat in Media Matters’ article on what it calls “NTU’s misinformation”, Media Matters is itself repeating misinformation. The very first, and primary, claim is that measures like the Section 199 tax deduction are “taxpayer giveaways”.

The commentary then applies a different standard to the President’s push for spending any new revenue from an increased tax burden on energy companies on “alternative energy.” Somehow, this is no longer a “taxpayer giveaway” but is now an “investment”.

Aside from the fact that the President is transparently trying to put the one part of the energy industry at a disadvantage to reward politically favored friends in the “green” sector, the various tax provisions to which Media Matters refers are clearly not subsidies.

Oddly enough, Media Matters even cites a source (apparently to bolster their argument) who clarifies that we are not talking about subsidies: …John Kingston, Director of News at energy information firm Platts said: ‘…I don't view them as subsidies.’” Clearly, we are not talking about subsidies, we are talking about deductions.

If a self-employed person takes a business trip and deducts airfare from his income tax return, the government never pays him a cent; the same applies here. Energy companies are simply permitted to take deductions for a variety of necessary business activities, along with a policy called “dual capacity” to help offset taxes paid to foreign governments. The United States is the only major industrialized country in the world that “double taxes” the foreign income of American businesses and individuals. NTU would certainly prefer a tax code that is far more simple, a code that would not “double tax” Americans, but that is not the situation we have today. Because international competitors do not face such a disadvantage, provisions like dual capacity are in place to keep America’s companies competitive in the global race for resources.

This is the larger reality Media Matters fails to explain. American firms face intense international competition from state-owned oil companies out of China, Venezuela, and the Middle East. Even with the deductions in question, they face an effective tax rate of around 34-41 percent, and have a relatively low profit margin of 5.7 cents on the dollar.

Not only would ending these tax deductions raise prices at the pump, it could put American jobs in jeopardy, (And yes, Brazil is expanding oil drilling; officials there are not just talking about ethanol.)

These dire consequences do not seem like a worthwhile tradeoff for a vindictive tax increase on an industry the left vilifies.  After all, GE (home of recent Obama Economic Advisory Committee head Jeffrey Immelt) recently received press for paying an effective tax rate far below the U.S. corporate average and President Obama never batted an eye. Of course, even this story has its wrinkles, as our recent study on tax system complexity noted.

Speaking of complexity, it’s one thing to advocate repeal of provisions like Section 199 and dual capacity across the board, in exchange for reductions in corporate tax rates that even the Administration acknowledges to be high. It is also quite legitimate to examine programs for all forms of energy that actually do represent commitments of tax dollars. NTU has criticized federal initiatives such as nuclear energy loan guarantees or the ultra deepwater natural gas and petroleum research program in the past.

Now that we have painted a broader picture of the challenges American energy companies face, and discussed the claim of “taxpayer giveaways”, we can examine Media Matters’ additional arguments point by point.

Media Matters: Energy Experts Say Getting Rid of Oil Subsidies Won’t Cause Jump in Gas Prices

Fact: New taxes on the oil and gas industry increase the cost of developing resources, exerting downward pressure on supply and, in turn, upward pressure on prices at the pump.

As stated previously,  painting legitimate business deductions as “subsidies” that exist far outside the realm of the supply chain and the process of bringing oil and gas to market is erroneous and misleading. But what will the effect be on prices at the pump?

The assumption that levying new taxes on oil and gas production will somehow decrease prices at the pump is patently untrue.

  • According to the Congressional Research Service (CRS), “the proposals also will make oil and natural gas more expensive for U.S. consumers, with the effect of reducing consumption of those fuels.” (“Report: Oil Industry Tax and Deficit Issues,” Congressional Research Service, 7/21/2009)
  • “On the one hand, the tax changes proposed in Table 1 would increase tax collections from the oil and natural gas industries and may have the effect of decreasing exploration, development, and production, while increasing prices and increasing the nation’s foreign oil dependence.” (“Oil Industry Tax Issues in the Fiscal Year 2011 Budget Proposal,” Robert Pirog, Specialist in Energy Economics, CRS, 3/24/2010)
  • Additionally, CRS notes that elimination of these deductions have “made oil and gas products artificially inexpensive, with consumer costs held below the true cost of consumption.” (“Oil Industry Tax Issues in the Fiscal Year 2011 Budget Proposal,” Robert Pirog, Specialist in Energy Economics, 3/24/2010)

Claim: President Obama has not banned oil production in the U.S.

Fact: The availability of domestic resources for leasing and development has plummeted during the Obama years.

Anyone who can drive to a gas station understands that not all production was banned as a result of President Obama’s moratorium (and subsequent “permitorium” on new oil and gas exploration. However, the policies did diminish our potential production, and by reducing supply, contributed to increased prices.

Beginning in 2008, elected officials began taking serious steps aimed at opening additional domestic resources to production – starting with the lifting of the executive moratorium on production in 2007 and 2008, and followed by the bipartisan decision in September 2008 to allow the Congressional moratorium on development to expire.

As of January 2009, the five-year leasing plan in place was poised to significantly increase domestic oil and gas production. But in early 2010, the President revised the plan, taking off the table significant resources that had previously been in the process of opening for development and leasing. In December of 2010, the Administration took it one step further, releasing an even more restrictive leasing plan that locked away the entire Atlantic, entire Pacific, and the Eastern Gulf of Mexico – effectively returning long-term domestic production prospects to where they stood prior to the lifting of both the executive and congressional moratoria in 2008. It’s difficult to call this anything but a “ban” on new development.

  • On January 9, 2007, the Bush Administration lifted an executive moratorium on offshore oil and natural gas drilling in Alaska’s Bristol Bay, which opened 5.6 million acres for energy development. (“Bush Lifts Oil-Drill Ban in Alaska’s Bristol Bay,” Washington Post, 1/10/2007)
  • Then on July 14, 2008, the Bush Administration lifted an executive moratorium on oil and natural gas on the Outer Continental Shelf, aiming to urge the Congress to act toward clearing “the way for exploration along the country’s coastline in response to soaring energy prices”. This also opened the door for the Department of the Interior (DOI) to put a plan in place that would allow lease development to move forward. This executive moratorium was put in place by the Clinton Administration in 1998 and was due to expire in 2012. (“Bush Lifts Drilling Moratorium, Prodding Congress,” The New York Times, 7/14/2008)
  • The expiration of the ban on drilling led to a leasing plan from the Bush White House that began to finally pave the way for significantly increased domestic production. (“The Shifting Offshore Landscape,” The Washington Post, 10/12/2010)
  • In early 2010, Obama released an updated leasing plan that began to lock away large areas that had recently been opened to leasing (upon lifting of the Congressional and executive moratorium, and issuance of President Bush’s five year leasing plan). (“The Shifting Offshore Landscape,” The Washington Post, 10/12/2010)
  • In December 2010, Obama released a much more restrictive plan, locking away the entire Pacific, entire Atlantic, and Western Gulf – essentially returning leasing conditions to where they were before the ban was lifted. (“The Shifting Offshore Landscape,” The Washington Post, December 1, 2010)

Claim: Oil and Gas Production has Increased Under President Obama’s Administration

Fact: Production increases witnessed in 2010 were rooted in previous policy and permitting.

Media Matters echoes President Obama’s claim in March that domestic production had increased in 2009 and 2010.

In reality, the statement is badly flawed. Oil production does not happen in measures of weeks or months or even years. The increase in production cited by the current White House is, in fact, primarily a result of permitting and policy decisions made by the Bush White House. Since companies spend years developing a single well from permit to production, to attribute the current uptick in production to Obama Administration policy is a mistake. Of course, oil prices (especially futures) often react much more quickly to decisions such as these – hence the reasoning behind committing quickly to new exploration, even though the gains will occur over a longer term.

More evidence of this fact? American domestic production is forecasted by the EIA to drop by 240,000 barrels per day (13 percent) in 2011, and an additional 200,000 barrels per day in 2012.

  • “But an uptick in production – such as the one the White House is currently touting in its press materials – cannot be attributed to permits granted yesterday, last week, or even five years ago. Companies spend years developing a well – the process from initial permit to production can take up to eight years. The increased production we're seeing now is mostly due to permits granted before Mr. Obama took office.” (“Time for a Cease-Fire in the War on Oil,” Dr. Joseph Mason, The Wall Street Journal, 4/25/2011)
  • This year, the Energy Information Administration forecasts a 240,000 barrels-per-day drop (13 percent) in the Gulf, and another 200,000 drop next year. The administration blames oil companies for sitting on existing permits. “These are resources that belong to the American people,” Interior Secretary Ken Salazar recently complained, “and they expect those supplies to be developed in a timely and responsible manner and with a fair return to taxpayers.” (“Time for a Cease-Fire in the War on Oil,” Dr. Joseph Mason, The Wall Street Journal, 4/25/2011)

After this thorough examination of Media Matters’ claims and the tax situation facing American energy companies, it is indeed apparent the American people are being misled on this issue – not by the National Taxpayers Union, but from the current Administration and its allies. Should the effort succeed, not only will jobs be lost, energy diversity will be diminished, retirement portfolios of millions of Americans could be endangered and consumer gas prices be at risk.  This may only be the beginning of a long list of tax increases sought by the Administration, all while refusing to enact any meaningful budget reform.

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